Earlier this year, ShareAction launched its ethnicity pay gap campaign, calling on FTSE100 companies to report these gaps to raise awareness of and help address racial inequality in the workplace. The first year of the programme will target financial services companies, before expanding to other sectors such as retail and facilities management. The initial focus on financial services is due to their role – not only are they corporate entities, but they are critical to capital allocations which underpin the overall system. Targeting capital allocators in the first instance can influence broader value chains and make our work easier as we progress to different sectors.
To date, ShareAction has asked 16 questions at AGMs during the proxy season on this issue. All companies have welcomed the questions, with Abrdn, Hiscox and Schroders committing to publish their ethnicity pay data once their disclosure rate has increased.
There are a few early adopters, such as Barclays, HSBC and Natwest, but more work needs to be done to ensure a standardised approach with ethnicity representation and pay gaps reported each quartile.
For those already reporting in some capacity, we are essentially asking, and supporting them, to make incremental improvements – such as further granularity by desegregated ethnic categories based on the Office of National Statistic’s classifications.
Disclosure rates and self ID
One of the primary barriers often raised by companies to reporting their ethnicity pay gap is the internal disclosure rate of self-identification (ID). The higher the disclosure rate, the more accurate the ethnicity pay gap disclosures can be. But increasing the disclosure rate to the necessary level has been a challenge to many.
A key issue in the collection of this data seems to be employee reluctance or inertia. Most companies we have spoken to have verbally committed to publishing their ethnicity pay gap, once they reach a 75% to 80% self-disclosure rate. There are several initiatives at financial services companies to try and increase the self-disclosure rates such as:
– Ensuring they have leaders within the business championing diversity, equity and inclusion (DE&I)
– Explaining to employees why they need the data, and how they will protect confidentiality
– Collecting the data at different points in the employment lifecycle
– Working with employee networks and forums
– Developing specialist apps to streamline data collection The good news is that disclosure rates are rising. We expect more financial companies to report their ethnicity pay gap by 2023.
Why pay gap reporting?
Reporting on pay improves diversity within the workplace because of transparency. An ethnicity pay gap report would help identify the exact location and causation of gaps and allow firms to provide an analysis of the gaps and put in place a targeted action plan to reduce any gaps. Ethnicity pay gap is an important metric to help uncover and showcase the diversity of a business at different levels.
Reporting will also help reveal some of the fundamental nuances of DE&I by disaggregating the data by different minority groups, as making this clear and transparent is the first step towards progress. Without metrics like ethnicity pay gap reporting it is difficult for shareholders, investors and broader society to have a baseline of DE&I to monitor progress.
Next steps
The campaign is a three-year process, while we are targeting financial services companies in the first instance, we will move on to other sectors as time goes on in the hope of increasing voluntary disclosures across the FTSE100.
As part of the campaign, we have teamed up with the CIPD – the professional body for HR and people development – alongside ethnic minority-led organisations including the Runnymede Trust, #Ethnicitypaygapcampaign, Project Speak Up and Reboot. We have other expert bodies– such as the Living Wage Foundation, 30% Club and Race Equality Group – to give guidance and advice throughout the campaign lifecycle.
We will also be bringing together 46 investors from our Good Work investor coalition, which has £3.8trn of assets under management, to support where possible.
Comments